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Wednesday, 19 February 2014

Insurance
outsourcer Quindell was also quite small when Midas tipped it in May 2012,
but the business has expanded dramatically and brokers expect further
substantial growth.

Back
then, the shares were 5.63p and the company was valued at £145 million. Today
the shares are 321⁄2p, valuing the group at almost £2 billion. The second
largest company on AIM, it is moving to the main market in April and chief
executive Rob Terry hopes to be in the FTSE 100 within 12 months.

His
ambition may well be achieved as brokers expect the stock to reach at least 75p
within the year.

Quindell
provides all the services that insurers offer to customers when they are
involved in a car accident and it is not their fault. These include processing
claims, medical and legal services and replacement cars.

The
firm handles about 25 per cent of all non-fault motor claims in the UK and it
is gaining new customers all the time. Insurers like to offload their claims
management to Quindell because it is efficient and manages to settle claims far
more cheaply than the insurers can.

Terry
has won £300 million of new business so far in 2014 and revenue from this
division is predicted at more than £1 billion this year, rising to £1.5 billion
over the next two years.

Quindell
is also involved in telematics, technology that shows insurers how safe their
customers are, using black boxes or even smartphone apps to track their driving
habits.

The
Association of British Insurers predicts that 10 million drivers will have
telematics installed in their cars or on their phones in the next five years
and Quindell’s technology is the best on the market.

The
company owns 49 per cent of telematics group Ingenie, which has been backed by
football presenter Gary Lineker.

Over
the next few months, Terry is expected to acquire the rest of Ingenie in an
all-share deal worth more than £50 million, but Lineker will remain on board.

Quindell
also works with insure the box, which owns Drive like a Girl, and it has signed
telematics contracts with three large insurers in the US and one in Canada.

In
2012, Quindell delivered profits of £49 million. Its 2013 results will be
announced in a couple of months, but profits are expected to surge to at least
£128 million, more than doubling again in the current year to £278 million.

A
maiden dividend of 0.1p is scheduled to accompany the 2013 figures, rising to
0.2p for 2014.

Midas
verdict: Rob Terry is fiercely ambitious and as a 12 per cent shareholder, he
is motivated to make Quindell succeed. The speed of growth has frightened some
investors, but large institutions such as Prudential and Investec are backing
the business, which is reassuring.

Existing
investors should hedge their bets and sell
30 per cent of their shares, but they should keep the rest. New
investors could find value at current levels.